7 Steps of the Bidding Process for Residential Projects
The typical bidding process follows these seven steps:
- Solicitation
- Estimation
- Submission
- Bid Selection
- Negotiations
- Contracting
- Project Delivery
Let’s take a look at each more carefully.
Step 1: Solicitation
Solicitation for commercial building projects usually involves a process where potential clients request bids for their projects via an Invitation to Bid (ITB), a Request for Proposal (RFP) or a Request for Quote (RFQ).
However, because residential projects are much less formal and often require less cross-team interaction, the solicitation process for residential projects is much simpler.
Although residential building clients can still solicit bids from companies and contractors, the process usually involves them finding a contractor and explaining the project.
In fact, potential clients usually search for contractors through platforms such as Angi, Houzwell or Thumbtack that allow them to do research on your profile, contact you or request your services — to which you can respond with an estimate, quote, and timeline for completion.
These platforms also enable contractors to indicate the kinds of projects in which they specialize, while also allowing them the option to take on other jobs that fit their budget and other constraints.
It also gives you, the contractor, the ability to come up with an accurate estimate before accepting the invitation, which we will discuss next.
Step 2: Estimation
Estimation occurs when your company determines how much the project will cost you and how much you’ll need to charge to make a profit.
The estimation phase adds up the project’s probable overall costs, including material costs, travel costs, tool costs, labor costs and any other additional costs if subcontractors will be needed.
Keep in mind: When creating an estimate, you want to learn as much as you can about the project as possible. If the project is one you’re certain you want to bid for, you may want to perform a site visit so you can create a more accurate estimate of the project.
Step 3: Submission
After you have an estimate for the project costs, it’s time to submit it to the client. This is an opportunity to demonstrate your knowledge of the market and attention to detail.
It’s important to submit your overall estimate to the client in a clean, visually-appealing document that breaks down the cost of your services in a clear and concise way. A well-prepared statement will testify to your professionalism and commitment to quality.
Step 4: Bid Selection
Bid selection is typically when the client chooses the contractor who will be awarded the project.
Because residential clients may be living in the place of the construction, clients often choose contractors based on experience, reviews, estimated costs and also the convenience of the time frame for completion.
Step 5: Negotiations
Even if the client decides to select you as a contractor, they may want to negotiate the terms of the contract. This could include structuring the timeline, pay schedule, materials, project delivery, and more.
Quick note: think about what you are willing to negotiate and what you are not willing to negotiate for each project. There may be a specific material that you know works better than others, or there may be important costs that the client hasn’t taken into account. Don’t let the client persuade you into completing a project that might get you a negative review. There’s also another reason for mentioning this, but we will talk about that later.
Step 6: Contracting
After you and the client have agreed on the estimate provided, it may be important to create a contract that lists out the expectations of the work being performed so both sides can see how it fits the specified pricing, materials, workload and timeline.
If something for you or the client is incorrect, don’t hesitate to ask questions or request contract revisions.
Once you sign the contract, you’re on your way to beginning and ultimately delivering on the project.
Step 7: Project Delivery
Project delivery will be based on one of four models:
- Design-Build: You are responsible for designing and building the project altogether. This is usually selected when the client trusts the design and construction process of the contractors as a whole.
- Design-Bid-Build: The client contracts with a company to provide construction drawings. As a builder, you then decide if you would like to complete the project based on the design provided. This option is selected when the client has a particular vision but wants to learn more about construction processes and available materials.
- Integrated Project Delivery (IPB): The client and contractor collaborate throughout the project. This type of project delivery is one of the most common and creates a collaborative effort between the client and contractor to create something unique.
- Construction Management at Risk (CMAR): The client hires a construction manager (CM) to oversee different aspects of the project, such as design and budget. The CM can also act as the lead contractor. This option is selected when there is a clear vision from start to finish, though there is some flexibility within the smaller elements of the project.
Types of Construction Bids
Depending on how a client is reaching out to you, there may be a different tendering method, which determines who can bid (or provide an estimate) on a project.
The client will choose a tendering method, and contractors can submit their bids or enter negotiations depending on the method.
Open Tendering
Open tendering allows any qualified contractor to submit a bid. Most commonly used for government projects, open tendering can create more competition and, therefore, more competitive pricing. In many cases, government and public projects are required to use an open tendering bid process. These are not often used on residential projects.
Selective Tendering
Selective tendering is when a property owner invites certain contractors to submit bids for a project. This method allows the client to receive bids from multiple contractors while keeping the field narrow. This is the most common tendering method for residential projects.
Negotiated Tendering
Negotiated tendering occurs when a property owner selects a contractor and then negotiates a contract. This may not result in the lowest price for the client, but it can be effective for highly specialized projects in which the contractor excels. This may also include negotiating at different steps throughout the project or if the scope of the project changes.
Serial Tendering
Serial tendering occurs when a property owner breaks down their project into smaller phases and then accepts bids for each stage separately, eliminating companies as the bidding process moves forward. This method can also be used when a property owner will be soliciting bids for similar projects over time.
5 Bidding Strategies in Construction
When determining a bidding strategy as a contractor, you should understand the bidding process and use different bidding strategies to give yourself the best chance of securing the project.
Using various strategies and finding ones that work best for your company can help you raise your hit-to-bid ratio, or, in other words, the number of clients that select you for their projects.
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Provide Low Bid
In the case of government contracts and public projects, the contract typically goes to the lowest bidder, provided they are qualified to complete the project. Private companies may also tend towards lower bids.
Providing a low bid can be tricky because you don’t know what other contractors are bidding, but doing your best to give a reasonably low bid while still protecting your profits can help you win more bids — and more clients — than others, especially when it comes to residential clients.
2. Leverage Connections
Leveraging connections can also help you win clients because you already have an established relationship with someone who can speak highly of you and your work. Whenever someone vouches for the quality and costs of your services, it’s an easy way to continue the conversation and find even more clients in the future.
3. Negotiate
The negotiation stage is when the client and the contractor go back and forth to determine terms that work for both. Negotiating can ensure both parties are satisfied with the work, and a willingness to negotiate may give you an advantage over other companies.
(This is also why we mentioned earlier the importance of knowing beforehand which terms you’re willing to negotiate and which ones you aren’t.)
4. Anticipate Demands
Anticipating demands means you’re less likely to be caught off guard. Looking at the project from a high level and noting things that the client could need means you can be prepared to address their demands and build a trusting relationship that could lead to more projects in the future.
5. Take It Slow
While you want to submit your estimate in a timely fashion, you should also take the time to understand project details and figure out where you can add value.
Taking it slow, ensuring you’re qualified, visiting the site if possible, and submitting a detailed and accurate estimate can go a long way toward winning more contracts, especially if you’re competing with someone who didn’t exercise the same diligence upfront and may have to adjust their estimates several times throughout the process.
9 Construction Bidding Tips for Success
Winning construction projects with residential clients is based on several factors, including your attention to detail, your ability to anticipate and address the client’s needs, your demonstrated fitness for the project, and the overall competitiveness of your estimate.
When you’re finding opportunities, it may take some trial and error to determine the method that works for you. These construction bidding tips for success can help you stay organized and win more bids.
1. Develop Quality Data
Analyzing your client projects will help you see where you’re winning clients and where you’re not. Look for what your winning bids have had in common that may distinguish them from bids that weren’t as successful.
What was your initial estimate? How did the client contact you? Are they located in the same area? Did they have similar project requirements? The answers to these kinds of questions can help inform your future bids when clients reach out.
Developing quality data can help you zero in on where you’ve been most successful so you can lean into that area or know what you need to do to branch out.
2. Choose Projects Wisely
Part of finding more clients is choosing projects wisely. Offering your services on anything and everything can be tempting, thinking you’ll win more clients that way. But it’s better to be more selective in your bidding based on your true qualifications to do the work.
You should also be aware of how the project will impact your business and whether or not it will move you closer to your goals.
3. Clarify Uncertainties Carefully
If there are any uncertainties in the project, don’t hesitate to ask questions to gain needed clarity. Knowing the details of the project and understanding the potential client’s needs can go a long way toward winning their business.
On the other hand, if the client comes to you with questions, take the time to explain everything so can understand what you offer.
4. Review Your Resource Management System
Before providing an estimate to a client, you must have the resources to complete the job. Reviewing your resource management system to determine which resources you’ll need to be successful — and whether those resources are even available — will ensure that you can complete the work if the client contracts you for work.
5. Communicate Effectively
Lack of attention to detail or a failure to communicate effectively can be a sign to potential clients that your work won’t be up to their standards.
Whenever you’re communicating with a potential client, make sure that you’re speaking in a professional manner that’s both clear and inviting. When a client feels they’re able to communicate with their contractor — and that the contractor cares about the work they’re providing — that client is more than likely to hire you, work with you in the future, and refer you to others.
6. Calculate and Address Potential Risks
There’s always a chance something will go wrong on a project, and it may not be possible to predict exactly what it will be.
Calculating potential risks, however, can allow you to accurately account for potential issues and factor them into your estimate.
It’s also important to communicate these risks to the client. If, for example, you have reason to think the client’s requests will cause damage to their property, you should explain this possibility to the client. Although a client may not agree at first or want to hear these comments, your honesty could lead to further trust down the line.
7. Visit the Construction Site If Possible
While you’ll receive a lot of the necessary information from the client, visiting the residence can give you unique insights into the scope and challenges of the project. If possible, visit the site before submitting your estimate.
8. Use Estimation Software
Estimation software can help you create an accurate estimate that accounts for supply costs and labor. It’s also a way to save project information that you may need later.
9. Understand Job Costs
Each job is unique, so taking the time to understand the costs and the materials and labor required to complete it will help you create an accurate estimate.
Reviewing the client’s requests and asking questions as they present themselves can allow you to understand the job costs and provide a more accurate bid.
Choose the Right Bidding Strategy for Your Business
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